Quick Definition

Equivalent Annual Cost (EAC) is a financial metric used to compare the annual costs of different investment projects over their lifespans, assuming each has a different lifespan.

Formula

Examples

• 1Comparing the EAC of two different machines in a factory to determine which is more cost-effective over time.
• 2Using EAC to decide whether to lease or buy office equipment based on their expected operational lifetimes.
• 3Evaluating the EAC of different HVAC systems to find the most economical option for a new building.

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